Hi Pete,
It's a 30's house, and all the houses on this stretch are the same - i.e. the power line goes directly into houses (with fuse on the inside of the house) - this was like this when we bought it, and the neighbours all have the same system, so i am not worried about that. The wiring in that photo is as we bought the house.
We knew about the problem, had scottish power out, and was going to move everything until the electrician said you could do it this way instead. Having a last minute panic to confirm it is OK.
I've seen DNO route their supply cable through house before now. Did Scottish Power provide you with a price for re-routing their supply cable?